Morgan Stanley (MS) and Citigroup (C) have delayed setting a valuation for their Smith Barney...

Morgan Stanley (MS) and Citigroup (C) have delayed setting a valuation for their Smith Barney brokerage JV from this week until Sept. 10. The postponement comes as the banks squabble over MS's purchase of a 14% stake from Citigroup; the latter values its 49% holding in the JV at $11B, while MS's bid represents 40% of that estimate. Perella Weinberg has been brought to help settle the dispute.

If Morgan Stanley lacks the cash to buy the brokerage outright, then they need a buyer. Already, they lack the ability to raise the dividend, the share price has declined from 107 to 14 over 12 years, and maangement has no experience running a franchise of this size. Already, we've seen brokers leave for their larger peers, Wells Fargo, and some smaller peers, since MS lacks a bank or the depth of management to make the brokerage successful. Or, they simply want more autonomy.

Rather than try to buy Smith Barney, MS should look for a buyer to buy both them and Smith Barney since the firm clearly is cash strapped. They also need to encourage a US based firm to be the buyer, not Mitsubishi, which has had its own issues.

I would then question how well MS can continue to do if their management is so weak that they cannot see that their clients, especially those from Citi, want a brick and mortar bank. Gorman has refused, and Fleming certainly isn't a banker. The approach seems to be to double up in brokerage, without having the infrastructure in place to support it. Wells Fargo, for example is several times larger than MS and has the management and financial strength as a bank that MS lacks. MS would be better off part of a larger US firm, not independent and struggling to gather the funds to make their operations work cohesively.

Well, they have cash and equivalents equal to about 1.5 times the book value, at around $42 billion. Wells has $16 billion, Citi $33 billion, and JPM $44 billion. If MS is cash strapped, then everyone is cash strapped.

Are you saying banks have to get into brokerage business? One of the reasons banks had become vulnerable in the first place was that they let their non core businesses lead them to reckless betting and also compromising their clients investments with their own interests.

As an MSSB customer, I have to say I still wish the firm was Smith Barney and that we were still part of Citi. At least Citi is too big to fail; MS isn't. We can thank Shelia Bair for this mess----it was her insistence that Smith Barney had to go. Big mistake. No doubt that Citi was into all kinds of things they did not need to be in and on which they made little or no risk-adjusted return (like how about Pandits Old Lane POS hedge fund). But SB was a good fit for Citi which not only needs wealth management but also the cheap deposits/funding that SB brought Citi. Plus, brokerage has light capital needs compared to other parts of the banking biz.